Kaiser affiliates will pay $556 million to settle a lawsuit alleging Medicare fraud

SAN FRANCISCO — Kaiser Permanente affiliates will pay $556 million to settle a lawsuit that alleged the health care giant committed Medicare fraud and pressured doctors to list incorrect diagnoses on medical records to receive higher reimbursements, federal prosecutors said.

The deal announced Wednesday came more than four years after the U.S. Department of Justice filed the legal claim in San Francisco that consolidated allegations made in six whistleblower complaints.

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The affiliates in the settlement include the Kaiser Foundation Health Plan; Kaiser Foundation Health Plan of Colorado; The Permanente Medical Group; Southern California Permanente Medical Group; and Colorado Permanente Medical Group P.C.

Kaiser, based in Oakland, is a consortium of entities that together form one of the largest nonprofit health care plans in the U.S. with more than 12 million members and dozens of medical centers.

The lawsuit alleged that Kaiser entities gamed the Medicare Advantage Plan system, also known as the Medicare Part C program, which gives beneficiaries the option of enrolling in managed care insurance plans.

Prosecutors contended that Kaiser “pressured its physicians to create addenda to medical records,” often months or more than a year after an initial consultation with an enrollee, because more severe diagnoses for beneficiaries generally result in larger payments to the plan.

“More than half of our nation’s Medicare beneficiaries are enrolled in Medicare Advantage plans, and the government expects those who participate in the program to provide truthful and accurate information,” Assistant Attorney General Brett A. Shumate said in a statement Wednesday.

Kaiser said the settlement includes no admission of wrongdoing or liability. The company said it chose to settle to avoid “the delay, uncertainty, and cost” of a trial.

“Multiple major health plans have faced similar government scrutiny over Medicare Advantage risk adjustment standards and practices, reflecting industrywide challenges in applying these requirements,” Kaiser said in a statement Wednesday. “The Kaiser Permanente case was not about the quality of care our members received. It involved a dispute about how to interpret the Medicare risk adjustment program’s documentation requirements.”